But that's pie-in-the-sky optimism, critics argue, and CalPERS should lower its expectations so it's not stung during less-rosy economic times (which force public agencies to put more money toward employee pensions and less toward services for their residents).

A return rate of 6.2 percent (rather than the 7.75 percent) found that the state's retirement systems were $290.6 billion short of what they've promised to pay retirees.

And an even less-rosy rate of return — 4.5 percent, which Stanford called “risk-free” — found the shortfall ballooning to $497.9 billion.

The public-sector types countered the shortfall is only $90 billion or so.

CalPERS, for its part, said this in a prepared statement about the dismal earnings in 2011:

"According to CalPERS investment staff, due to the high volatility of global equity markets in 2011 (caused in large part by the ongoing Euro debt crisis and the slowing of global economic growth) the Fund experienced a 7.9 percent loss in its public equity asset classes. CalPERS U.S. equity portfolio lost .03 percent, while its international equity assets declined 13.9 percent.

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